European leaders – particularly those in the single currency zone – are eyeing the cliffhanger Italian election with anxiety, worried that an ungovernable stalemate in Rome could paralyse the outgoing prime minister Mario Monti's austerity programme and renew doubts about the euro's stability following months of relative calm.
Following the fall of the last Silvio Berlusconi government in 2011 and the establishment of the technocratic Monti administration, last Sunday's election had been keenly awaited as an exercise in clearing the air. Instead it looks likely to have muddied the waters.
Early results point towards a highly unstable outcome, suggesting a possible further six months of uncertainty and perhaps another election. "Wait and see if a stable government can be formed," said Martin Schulz, the German social democrat who heads the European parliament.
Monti, along with his fellow Italian technocrat Mario Draghi, president of the European Central Bank (ECB), have played key roles in restoring relative calm in the eurozone since last summer. Draghi does not have to face the voters; Monti received a drubbing in both chambers in Rome.
The financial markets appeared to view the centre-left bloc led by Pier Luigi Bersani as the safest pair of hands. As it appeared that Bersani was on course to be next prime minister, the Milan exchange reacted favourably.
The nightmare scenario for the eurozone, not least for Berlin, would be a victory for Berlusconi. The Germans and the ECB manoeuvred to help bring about his downfall in 2011. But the strong performance by the Berlusconi camp, coupled with the even stronger outcome for the maverick Five Star movement of the comedian Beppe Grillo, is certain to set off alarm bells across austerity-strapped Europe. More than half the Italian electorate voted for politicians viewed by the governing elite as unashamed populists.
Following the election last May of a socialist president in France, Europe's centre-left anticipated a boost after years in the doldrums, with social democrats taking the ascendancy in two of the biggest four EU countries.
During his 15 months in power Monti has embraced austerity and sought to launch structural reforms to conform to German-led fiscal orthodoxy and bring down the cost of Italian borrowing on the bond markets. But he also formed an alliance with the French president, François Hollande, aimed at taking the rougher edges off Berlin's austerity prescriptions and demanding that Germany, too, had to act to reduce the crippling costs of Italian borrowing.
A Bersani government would be certain to ally itself more closely with Paris in arguing for growth and employment policies in the euozone. But with the French economy in increasingly poor shape, it is less than clear whether this would prove a winning argument at Europe's top table.
Forecasts from the European commission this week put the projected French budget deficit at 3.7% of GDP this year, well beyond the 3% target, with the economy stagnating. In a sign of how worried it is about France's economic health and its capacity to drag down Germany and the rest of the eurozone, Berlin has already abandoned its hardline, urging that the French should be cut some slack on the euro rules so long as the budget targets are met by next year.
The volatile political climate, confirmed in Italy, combined with dismal economic data this week from the Brussels number-crunchers, suggests a loosening of the austerity regimes may be on the cards.
But another six months of instability in Italy may also delay economic reforms, unsettle the markets, ask more questions of the euro and raise the political temperature before the crucial German elections in September when Europe's most powerful leader, Angela Merkel, seeks a third term.
guardian.co.uk © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds
No comments:
Post a Comment